Home   Logon   Portfolio Managers   Research and Commentary   About Us    Contact Us       Follow Us: 

Search by Ticker, Keyword or CUSIP       

Blog Home
   Brian Wesbury
Chief Economist
Click for Bio
Follow Brian on Twitter Follow Brian on LinkedIn View Videos on YouTube
   Bob Stein
Deputy Chief Economist
Click for Bio
Follow Bob on Twitter Follow Bob on LinkedIn View Videos on YouTube
  The Consumer Price Index Rose 0.1% in July
Posted Under: CPI • Data Watch • Inflation
Supporting Image for Blog Post


Implications:  Consumer prices rose 0.1% in July, continuing the tame inflation that started in February.  Consumer prices rose at a 3.6% annual rate in the six months ending in January, and are now down at a 0.1% annual rate over the past six months.  So what's changed?  Energy prices declined substantially from mid-2014 through the start of 2016 and then rose through much of last year.  That rise helped push overall consumer prices up at a 3.6% rate in the six months ending in January.  But with energy prices generally down since then, overall inflation has been quiet as well.  Still, we think inflation is in a general rising trend.  Prices rose 0.2% in the twelve months through July 2015, 0.8% in the twelve months through July 2016, and 1.7% in the last twelve months.  Moreover, that acceleration in inflation has arrived despite oil prices being lower today than in 2015.   "Core" prices, which strip out the volatile food and energy components, have shown steadily rising prices of late, increasing in eleven of the last twelve months.  Within core inflation, a small sub-set of categories have kept prices from reaching or exceeding the Fed's 2% inflation target.  Cellphone service prices have declined 13.3% in the past year, while major household appliances are down 5.2% and vehicle costs are falling.  For the consumer these falling prices - which are the result of technological improvements and competition – plus rising wages mean increased spending power on all other goods. But it tempers inflation readings.  Meanwhile, costs for medical care and rent continue to push overall consumer prices higher.  We expect rents to accelerate in the year ahead as supply constraints get tighter in the housing market.  We still expect inflation to trend towards 2% in the medium term, and don't think the gains to consumers from falling prices in select areas are reason for concern or a justification for the Fed to slow the pace of rate hikes.  The best news in today's report is that real average hourly earnings rose 0.2% in July.  These earnings are up 0.7% over the past year, up at a 2.6% annual rate over the past six months, and a 3.0% annual rate over the past three months.  Because the Fed believes in the Phillips Curve, the trend of accelerating price and wage gains should have Fed officials focusing more on the potential for inflation to rise faster than desired as the jobless rate continues to fall below their long-term target.  That's why we expect the Fed to stick to their plan of starting to unwind the balance sheet while also raising rates one more time in 2017. 

Click here for PDF version

Posted on Friday, August 11, 2017 @ 10:42 AM • Post Link Share: 
Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2023 All rights reserved.